1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ---------------------------------------- ) ISCR Case No. 16-00517 ) Applicant for Security Clearance ) Appearances For Government: Mary Margaret Foreman, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ LEONARD, Michael H., Administrative Judge: Applicant contests the Defense Department’s intent to revoke his eligibility for access to classified information. He has a history of financial problems, which includes a past-due mortgage loan, charged-off credit card accounts, and back taxes owed to state and federal tax authorities for multiple tax years. Although he has made progress in resolving these matters, his tax problems are too much, went on too long, and are too recent to justify a favorable clearance decision. Accordingly, this case is decided against Applicant. Statement of the Case Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on March 17, 2015. This document is commonly known as a security clearance application. In May 2016, after reviewing the application and the information gathered during a background investigation, the Department of Defense Consolidated Adjudications Facility, Fort Meade, Maryland, sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the 2 national interest to grant him eligibility for access to classified information.1 The SOR is similar to a complaint. It detailed the factual reasons for the action under the security guideline known as Guideline F for financial considerations. Applicant answered the SOR on June 25, 2016, and he requested a hearing. The case was assigned to me on August 23, 2016. The hearing was held as scheduled on October 21, 2016. Department Counsel offered Exhibits 1-4, and they were admitted. Applicant testified on his own behalf and offered Exhibit A, and it was admitted. The transcript of hearing (Tr.) was received on October 31, 2016. The record was kept open until November 30, 2016, to allow Applicant to present additional documentation. He timely submitted a comprehensive exhibit consisting of a four-page memorandum and 11 enclosures, which are admitted without objections as Exhibit B. Thereafter, after the record had closed, on December 23, 2016, he submitted a two-page memorandum with two enclosures, which are admitted without objections as Exhibit C. Findings of Fact Applicant is a 56-year-old employee who requires a security clearance for his job as a senior system engineer for a company doing business in the defense industry. He has worked for this company since 2016. He is married and has two children, ages 21 and 12. His wife is employed by the federal government with an annual salary of about $39,000. He is a graduate of a U.S. military academy, and he then went on to serve more than 20 years of honorable service as an active duty military officer, retiring in 2005. More recently, Applicant was employed full-time as a proposal manager for a federal contractor when he was laid off in October 2014. He then worked part-time as a consultant until beginning his present job in March 2016. This 18-month period of underemployment resulted in irregular income that was much less than his previous job. He attributes this circumstance as the primary reason for his financial problems.2 In addition, he pointed to other factors that played a part in his financial problems, such as the following: (1) additional commuting expenses for employment; (2) increased expenses for utilities; (3) his youngest child’s extra-curricular activities; (4) bad choices with auto leases; (5) unscheduled trips for family-health matters; and (6) his present job required him to relocate across country and live as a geographical bachelor incurring additional living expenses.3 1 This action was taken under Executive Order (E.O.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended, as well as Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on September 1, 2006, apply here. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). 2 Tr. 31. 3 Tr. 60-68. 3 Under Guideline F for financial considerations, the SOR allegations concern the following matters: (1) a past-due mortgage loan for his primary residence; (2) five charged-off or collection accounts for a total of about $39,356; (3) an unpaid $6,921 judgment obtained after a charged-off account; (4) a state tax lien filed in 2009 for $2,635; (5) approximately $12,000 in back taxes owed to the IRS for tax year 2008; and (6) a wage garnishment in 2013 to collect back taxes owed to a state tax authority. In his answer to the SOR, he admitted the allegations except for the state tax lien and the back taxes owed to the IRS, which he denied. He explained the state tax lien was erroneous and had been vacated. He also explained that he was paying the IRS $175 every other week. Additional details about these matters are discussed below. SOR allegation ¶ 1.a--past-due mortgage loan in amount of $9,249. This delinquency stems from Applicant’s primary residence.4 Credit reports reflect that the account was 60-days past due in the amount of $6,878 as of March 2015, and 90-days past due in the amount of $9,249 as of December 2015.5 Since resuming full-time employment in 2016, Applicant has improved the standing of that account, and it is now 30-59 days past due in the amount of $3,733, and he expects to be current in January 2017.6 SOR allegation ¶ 1.b--$20,793 charged-off account. This delinquency stems from a credit card account.7 Applicant has made $75 monthly payments on this account since October 2016.8 SOR allegation ¶ 1.c--$10,808 charged-off account. This delinquency stems from a credit card account.9 Applicant has made $200 monthly payments on this account since October 2016.10 SOR allegation ¶ 1.d--$6,721 charged-off account. This delinquency stems from a credit card account that was reduced to a judgment, and it is discussed below.11 4 Tr. 43-46. 5 Exhibits 3 and 4. 6 Exhibit B at Enclosure B; Exhibit C at Enclosure A. 7 Tr. 46-48. 8 Exhibit A at 1. 9 Tr. 48-49. 10 Exhibit A at 2. 11 Tr. 49-50. 4 SOR allegation ¶ 1.e--$4,589 charged-off account. This delinquency stems from a credit card account.12 Applicant has made $255 monthly payments on this account since October 2016.13 SOR allegation ¶ 1.f--$2,981 collection account. This delinquency stems from an auto lease account.14 Applicant has made $150 monthly payments on this account since July 2016.15 SOR allegation ¶ 1.g--$185 charged-off account. Applicant believed that he had paid off this account some time ago, learned otherwise, and he paid it after the hearing.16 SOR allegation ¶ 1.h--$6,921 unpaid judgment. This delinquency stems from a credit card account as mentioned above. Applicant has made $200 monthly payments on this account since October 2016.17 SOR allegation ¶ 1.i—2,635 state tax lien. This tax lien was entered erroneously on November 18, 2009, and it was vacated shortly thereafter on November 25, 2009.18 SOR allegations ¶ 1.j and k--$12,000 in back taxes owed to the IRS for tax year 2008, and a wage garnishment in August 2013 for about $1,500. These two allegations are discussed together because they are related. Applicant did not disclose any delinquent taxes on his 2015 security clearance application.19 He mentioned both matters during his 2015 background investigation.20 Concerning the federal back taxes, he stated that he was on a payment plan with the IRS for tax year 2008 because he owed about $12,000 due to distribution from an IRA account. He stated that he set up a payment plan, but had been delinquent on payments. He stated that he prioritized payments on other debts over the back taxes. Concerning the wage garnishment, he stated that his wages were garnished due to delinquent state income taxes for tax year 2008, 2011, or both. 12 Tr. 50-51. 13 Exhibit A at 4. 14 Tr. 51. 15 Exhibit A at 5. 16 Exhibit B at Enclosure C. 17 Exhibit A at 3. 18 Exhibit B at Enclosure D. 19 Exhibit 1. 20 Exhibit 2. 5 It was established during the hearing that Applicant’s tax problems were more extensive and went beyond tax year 2008.21 He stated that the federal back taxes were being paid at the rate of about $350 monthly via a tax levy or garnishment of his wife’s federal salary. He further stated that he owes about $20,000 in back taxes to the IRS for tax years 2006, 2008, 2010, and 2012, although he had no documentation for the federal or state back taxes. Applicant’s post-hearing documentation shows that he owes more than $22,000 in back taxes to the IRS and the state tax authority.22 For the IRS, he owes about $20,430 for tax years 2009-2015. There is a balance due for every tax year except 2009 and 2013. For the state, he owes about $1,802 for tax years 2014 and 2015. He is currently paying the IRS $191 per pay period as the money is withheld from his wife’s federal salary. He understands that if the payment is increased to $241 per pay period, then the IRS will consider establishing an installment payment agreement. He began paying the state $111 per month in October or November 2016. He did not present any documentation for tax year 2008, but it is presumed that 2008 has a zero balance since current payments are being applied to tax year 2010.23 Applicant’s IRS account transcripts for 2009-2015 show that he and his wife earned a relatively high income during this period.24 For 2009, they had an adjusted gross income (AGI) of $196,392 and taxable income of $136,514. For 2010, the AGI was $202,832 and taxable income was $140,739. For 2011, the AGI was $190,144 and taxable income was $129,623. For 2012, AGI was $200,431 and taxable income was $139,141. For 2013, AGI was $174,969 and taxable income was $83,080. For 2014, AGI was $181,216 and taxable income was $125,210. For 2015, AGI was $136,111 and taxable income was $83,963. With their work income and his military retired pay, their current monthly net income is about $10,829.25 His monthly household budget shows a positive net remainder of about $857.26 In addition, his monthly budget now has more leeway because he is no longer budgeting for his oldest child’s college expenses after recent approval of a student loan.27 21 Tr. 54-57 22 Exhibit B at Enclosures E-I. 23 Exhibit B at Enclosure E. 24 Exhibit B at Enclosure E. 25 Exhibit B at Enclosure A. 26 Exhibit B at Enclosure J. 27 Exhibit C at Enclosure B. 6 Law and Policies It is well-established law that no one has a right to a security clearance.28 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.”29 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security. A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.30 An unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.31 There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.32 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.33 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.34 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.35 In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.36 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.37 28 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance). 29 484 U.S. at 531. 30 Directive, ¶ 3.2. 31 Directive, ¶ 3.2. 32 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). 33 Directive, Enclosure 3, ¶ E3.1.14. 34 Directive, Enclosure 3, ¶ E3.1.15. 35 Directive, Enclosure 3, ¶ E3.1.15. 36 Egan, 484 U.S. at 531. 37 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). 7 Discussion Under Guideline F for financial considerations,38 the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is: Failure or inability to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about a [person’s] reliability, trustworthiness, and ability to protect classified information.39 The concern is broader than the possibility that a person might knowingly compromise classified information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions: AG ¶ 19(a) inability or unwillingness to satisfy debts; AG ¶ 19(c) a history of not meeting financial obligations; AG ¶ 20(b) the conditions that resulted in the financial problem were largely beyond the person’s control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce, or separation), and the [person] acted responsibly under the circumstances; AG ¶ 20(c) the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control; and AG ¶ 20(d) the [person] initiated a good-faith effort to repay overdue creditors or otherwise resolve debts. The evidence here supports a conclusion that Applicant has a problematic financial history sufficient to raise a security concern under Guideline F. That is understandable since he went through an 18-month period of underemployment as a part-time consultant during 2014-2016 when he earned less than his previous full-time job. The lack of income resulted in him falling behind and then defaulting on a number of financial obligations, including his mortgage loan. Since resuming full-time 38 AG ¶¶ 18, 19, and 20 (setting forth the concern and the disqualifying and mitigating conditions). 39 AG ¶ 18. 8 employment in early 2016, Applicant has entered into payment arrangements for five delinquent accounts, paid off a minor account, and is nearly current with his mortgage loan. He also presented proof of the erroneous state tax lien. All those matters reflect positively on his security suitability. The same cannot be said for Applicant’s history of tax problems, which extends beyond tax year 2008 as alleged in the SOR.40 The repeated failure to pay income taxes when due bears close examination and is a matter of serious concern to the federal government.41 The evidence shows he failed to pay federal and state income taxes when due for multiple tax years up through tax year 2015. Moreover, the federal back taxes are currently being paid by a tax levy of his wife’s federal salary, and his wages were in the past garnished for payment of state back taxes. Those circumstances suggest that Applicant’s payment of the back taxes has not been purely voluntary. This pattern of conduct also suggests that he has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. An applicant who has a history of not fulfilling their tax obligations may be said not to have demonstrated the high degree of judgment and reliability required for access to classified information. I considered Applicant’s 18-month period of underemployment, the resulting financial problems it created, and his efforts to address those matters. I also considered that Applicant and his wife had a combined AGI of $317,327 for tax years 2014 and 2015, which was most of the period of his underemployment. Taxable income during that period was $209,173. That level of income suggests that Applicant was carrying excessive debt before his period of underemployment began. Likewise, the relatively high level of income during 2009-2015 suggests that Applicant had the means to pay his income taxes when they were due, but nonetheless failed to do so. Finally, I considered that his tax problems date back to 2008, well before the period of underemployment began in 2014. His favorable matters are outweighed by the nature, extent, and seriousness of the tax problems. To sum up, Applicant’s tax problems are too much, went on too long, and are too recent to justify a favorable clearance decision. Applicant’s history of tax problems creates doubt about his reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. In doing so, I gave substantial weight to Applicant’s many years of honorable military service and work in the defense industry. Accordingly, I conclude that he did not meet his ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant him eligibility for access to classified information. 40 Although the tax years beyond 2008 are not alleged in the SOR, Applicant was on notice of these matters and had an opportunity to respond, as he provided the additional tax information during his hearing testimony and in his post-hearing documentation. 41 The General Accountability Office (GAO) expressed serious concern over the relationship between tax delinquents and clearance holders in its July 28, 2014 report, Security Clearances: Tax Debts Owed by DOD Employees and Contractors, http://www.gao.gov/assets/670/665052.pdf. 9 Formal Findings The formal findings on the SOR allegations are: Paragraph 1, Guideline F: Against Applicant Subparagraphs 1.a-1.i: For Applicant Subparagraphs 1.j-1.k: Against Applicant Conclusion In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information. Michael H. Leonard Administrative Judge